George Osborne is "pretty confident" he will not need to raise taxes
or cut benefits further, as he believes Whitehall departments can find £11.5
billion in savings.

The Chancellor said he has already signed up seven Government departments for deep cuts of around 10 per cent to their budgets, including Justice, Energy, Communities, Environment, the Foreign Office and Northern Ireland.

This means he is about a fifth of the way towards his £11.5 billion target for the Spending Review covering the years 2015 to 2016.

Mr Osborne said everyone around the Cabinet table, including Liberal Democrats, agrees that further savings need to be made.

However, he is still locked in a battle to find another £8 billion from another dozen secretaries of state, many of whom are fiercely resisting cuts to their budgets.

Mr Osborne has been under pressure to raid the welfare budget again or dip into the ring-fenced aid, education or NHS pots.

However, the Chancellor insisted today that his "central assumption" is that it will not be necessary to get further savings from cutting benefits.

"We've already accepted big cuts from welfare, now we've got to look for savings in Whitehall, in government, in bureaucracy," he said.

He said he had "in effect" ruled out further tax rises to help balance the books beyond those previously announced in this year's Budget.

Mr Osborne is facing calls to ease his demands on the Defence and Home Office budgets after the Woolwich terror attack and arrests of suspected extremists.

Speaking on the BBC, he promised his cuts would not be responsible for putting the Britain's safety at risk.

"Look, I'm not going to do things that endanger the security of the country at home or abroad," he said.

The Chancellor said there are particular savings to be made in the justice department, within the court service and probation. Asked about plans for further involvement of companies in running Britain's courts, Mr Osborne said he had no plans to "privatise" the judicial system.

He said cutting back on printed paper would be one way of saving money in the justice system.

Mr Osborne toured the television studios to set out his success in persuading departments to make cuts after reports of a number of Cabinet ministers resisting his demands. Many have been calling for further welfare cuts instead.

The Daily Telegraph reported today that Iain Duncan Smith, the Work and Pensions Secretary, offered to make more cuts to the welfare bill, which is being resisted by the Liberal Democrats.

He personally contacted the Defence and Home Secretaries to set out the details of the proposed cuts after they raised concerns about the impact on national security of further spending reductions.

Mr Duncan Smith is understood to have offered to restrict housing benefit for the under-25s, and to limit state payments to families with more than two children.

Both proposed cuts were publicly floated by the Prime Minister last year, but were thought to be off the agenda during this Parliament.

The discussions over further welfare cuts took place before last Wednesday’s suspected terror attack in Woolwich, which is expected to lead to renewed pressure on the Treasury to protect security spending.

The Liberal Democrats have pledged to block any further working-age benefit cuts, but will now come under intense pressure from some Conservatives to reverse their opposition ahead of next month’s Spending Review.